The rising cost of healthcare

“In what continues to be an uncertain economic environment, organizations cannot afford health care costs growing at 7% each year. While health care reform continues to represent potential systemic change in a few years, employers will continue to shift cost to employees in order to keep company costs to a manageable level.” –John Zern, executive vice president and practice director for health & benefits-the Americas, for Aon Hewitt

It’s a line item that bedevils the budges of businesses large and small across the U.S. these days: the rising cost of health care. This hits trucking particularly hard in a number of ways, for rising health care costs are occurring simultaneously with rising equipment costs, recruiting and retention costs, regulatory compliance costs, just to name a few.

Health care is also more critical in some ways to trucking than other industries because, of course, the health and wellness of truck drivers directly affects their ability to safely pilot big rigs and other commercial vehicles on America’s highways and byways. Thus, making sure drivers are healthy directly impacts the safety of thousands of other motorists driving alongside commercial vehicles day in and day out.

[As an aside, here are few thoughts from Bob Perry, president of Rolling Strong, on the subject of truck driver health and wellness.]

Yet the cost of health care keeps on rising – in fact, out pacing inflation by a wide mark. As a result, many companies across the business spectrum are trying to cope by shifting more of the costs to their employees – at a time, however, when workers can ill afford more bills in the mailbox. For many, the solution is to cut back on health care or do without it completely – and that type of strategy (or lack of one) creates its own set of risks, especially where truck drivers are concerned.

Let’s look at some of the projections. According to a new study by global human resource consult firm Aon Hewitt – a division of insurance provider Aon Corp. – the average health care premium rate increase for 2012 is going to be around 7%, which is slightly lower than the 7.5% mark in 2011 and on par with the 6.9% increase in 2010.

However, the average total health care premium per employee for large companies is projected to be $10,475 in 2012, up from $9,792 in 2011, and $9,111 in 2010. Aon believes the amount employees will be asked to contribute toward this premium cost in 2012 is $2,306 – some 22% of total health care premiums – compared to $2,084 in 2011 (21.3%) and $1,952 in 2010 (21.4%).

Meanwhile, average employee out-of-pocket costs, such as co-payments, coinsurance and deductibles, are expected to be $2,275 in 2012, compared to $2,007 in 2011, and $1,691 in 2010.

[For a different take on the rising costs of healthcare, watch economics professor Antony Davies discuss how, over the last 40 years, while the cost of healthcare in the U.S. has been rising much faster than the cost of other goods, more and more lives are being saved.]

Of course, there’s a wide disparity in health care costs increases based on geography, too, Aon Hewitt determined. In 2011, major U.S. markets that experienced rate increases higher than the national average included Orlando (11.1%), New York City (9.5%), Orange County (9.1%), Houston (8.9%), Boston (8.6%) and Los Angeles (8.5%).

So, what’s driving such increases? Aon Hewitt’s analysis points to several factors. First, employers continue to experience an increase in the quantity and cost of catastrophic claims, as slower levels of hiring have resulted in slightly older workforces who are more prone to costly medical conditions.

Also, generally poorer health – leading to increases in costly conditions such as diabetes and heart disease – make it difficult for employers to deploy tactics that drive short-term cost savings.

[Steve Rohleder, Accenture's Health & Public Service Chief Executive, talked about ways to offer incentives for people to change their lifestyles in order to lower healthcare costs at the 2010 World Health Care Congress last year in Washington, D.C.]

As a result, employers continue to ask employees to absorb increases through a combination of out-of-pocket cost and increased payroll contributions, Aon Hewitt concluded. Furthermore, against this backdrop, employers are focused on ways to mitigate these “unhealthy” trends over both short- and long-term, while awaiting further regulations related to health care reform.

“In addition to sharing costs with employees, organizations are implementing more aggressive 'incentive' strategies to get [workers] to understand, and manage, their health,” noted Jim Winkler, large market segment leader with the health & benefits practice at Aon Hewitt.

“Some employers are adopting the mindset that says, 'if you are going to spend a lot of house money, you need to play by house rules,' including completing a health-risk questionnaire, participating in prevention and wellness plans, and better managing chronic conditions,” he added.

At the end of the day, however, companies and workers alike are facing big dollar hikes in terms of health care costs – and that sure doesn’t help the bottom line of any industry, much less those involved in the trucking business

“While health care reform continues to represent potential systemic change in a few years, employers will continue to shift cost to employees in order to keep company costs to a manageable level,” he added.